SOX prompts private cos. to revise acc'ting

Menlo Park, Calif. — Spurred by sweeping reforms in the accounting profession such as Sarbanes-Oxley, many privately held companies are examining their financial reporting practices and implementing changes voluntarily, according to a recent survey.

Among the 1,359 chief financial officers who were polled at private U.S. companies with more than 20 employees, 48 percent indicated that they’ve revised their accounting procedures since the advent of new regulations, particularly in the areas of payroll and benefits — cited by 44 percent of those who’ve made changes.

“Even though private businesses are not legally required to comply with regulations such as Sarbanes-Oxley, many firms are looking at their high-exposure areas with increased scrutiny,” said Paul McDonald, executive director of Robert Half Management Resources, which administered the survey. “As a result, nonpublic companies are reviewing wages, salary and bonuses, as well as medical and other employee benefits such as phantom stock options, as though they were publicly traded.”

In terms of frequency, other areas in which private company CFOs have enacted changes to financial reporting practices include purchasing, at 37 percent; accounts receivable/sales, capital assets and conversion/inventory, each cited by 31 percent; and credit management/collections, cited by 29 percent.